Is my military pension/retirement income taxable to Idaho?

If you are an Idaho resident, military retirement or pension income that is included in your federal taxable income is taxable on your Idaho return.

However, Idaho allows eligible taxpayers to subtract qualifying military retirement income using the Retirement Benefits Deduction, which can reduce or eliminate the amount taxed by the state.

📄 How Idaho Taxes Military Retirement Income

• 🧾 Idaho begins with federal taxable income
• 🪖 Military retirement income taxable federally is also taxable in Idaho
• ❌ Idaho does not fully exempt military retirement income from tax
• ➖ Instead, Idaho offers a Retirement Benefits Deduction for taxpayers who meet specific eligibility requirements

✅ Eligibility Requirements for the Retirement Benefits Deduction

A taxpayer may qualify for the Idaho Retirement Benefits Deduction for military retirement income if all applicable requirements below are met:

🪖 Qualified Recipient

• ✅ The taxpayer is a retired member of the U.S. military, or
• ✅ A qualifying surviving spouse receiving military retirement or survivor benefits

🧾 Income Requirement

• ✅ The military retirement income is included in federal taxable income

🎂 Age, Disability, or Employment Test

The taxpayer must meet at least ONE of the following conditions:

• ✅ Age Test
  • The taxpayer is age 62 or older
  • ✔ No employment requirement applies
• ✅ Disability Test
  • The taxpayer is classified as disabled
  • ✔ Age does not matter if the taxpayer is disabled
• ✅ Employment Test (Only if Under Age 62)
  • The taxpayer is under age 62, not disabled, and:
    • 🧑‍💼 Worked during the tax year, and
    • 📄 Earned enough income to be required to file a federal return

👥 Filing Status (If Married)

• ✅ Married taxpayers must generally file a joint Idaho return to qualify

⚠️ Deduction Limits

• The deduction is limited by Idaho law and may be capped based on:
  • Filing status
  • Other retirement income
  • Social Security benefits
• ❗ The deduction is not automatic

➖ Retirement Benefits Deduction

The Retirement Benefits Deduction is a subtraction from income, not a tax exemption or tax pause.

• ✍️ Must be manually entered on the Idaho return
• 📆 Eligibility and limits may vary by tax year

🧭 How to Enter the Deduction (If Eligible)

Follow these steps to manually enter the deduction:

1. 📍 Go to State Section
2. ✏️ Select Edit Idaho Return
3. ➖ Choose Deductions from Income
4. 🪖 Select Retirement Benefits Deduction
5. 🧮 Enter the qualifying military retirement income included in the federal return

⚠️ Key Reminder

Military retirement income remains taxable in Idaho unless a valid subtraction is claimed. Taxpayers should carefully review the eligibility requirements to determine whether they qualify for the Retirement Benefits Deduction.